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MarketView
Events defining the day's trading activity on Wall Street
Lauren Rudd
Thursday, November 1, 2012
Summary
The S&P 500 chalked up its largest daily percentage
gain since September 13, when the Federal Reserve unveiled its plan for
a third round of stimulus or quantitative easing, also known as "QE3,"
as bullish consumer confidence and private-sector jobs data gave
investors reason to cheer following Sandy's devastating sweep through
the U.S. Northeast. Technology and materials sector shares led the
advance in a day of mostly average volume. The S&P 500 technology index
rose 1.8 percent, while the semiconductor index rose 3.3 percent. The
S&P materials index .gained 2 percent. Data from payrolls processor ADP indicated that
industry added 158,000 workers in October - the fastest pace in eight
months. In another encouraging sign, consumer confidence rose during
October to its highest point in more than four years, the Conference
Board said. The numbers showed a slightly more positive picture
of the economy a day ahead of Friday's nonfarm payrolls report, the most
widely watched economic indicator. Employers are expected to have added
125,000 jobs to payrolls in October, up from 114,000 in September,
according to a Reuters survey of economists. The unemployment rate is
forecast to have inched up to 7.9 percent after a dramatic drop of 0.3
percentage point in September. Pfizer, which delayed the release of its quarterly
results because of the storm, posted revenue that fell far short of
expectations, pushing its shares down 1.3 percent to $24.55. Meanwhile,
Exxon Mobil, which like Pfizer is a Dow component, gained 0.5 percent to
$91.60 after the company reported quarterly earnings that slipped from a
year ago, although it still topped expectations. Exxon's oil and gas
output, however, declined more than expected. Northeast residents and workers were still
recovering from the aftermath of Sandy, which killed scores of people in
North America and the Caribbean, and wreaked havoc up and down the U.S.
eastern seaboard. In after-hours trading, Starbucks rose 6.2 percent
to $49.50 after the company reported higher quarterly earnings and
raised its full-year forecast. The stock closed during regular trading
at $46.62. Official and private-sector factory surveys in China
indicated that the world's second-largest economy regained some of its
prior traction, thereby adding support for the financial markets. Shares of JDA Software, a manufacturer of
supply-chain management software, rose 17.3 percent to $44.76 after the
company agreed to be bought by privately held rival RedPrairie for about
$1.9 billion in cash. About 6.7 billion shares changed hands on the three
major equity exchanges, as compared with the average daily closing
volume of 6.5 billion shares year-to-date. Volume had been expected to
jump after Sandy forced a historic two-day weather-related market
closure earlier in the week but traders said participation remained
light to normal.
Consumer Confidence Hits 4-Year High
A report released by the Conference Board on
Thursday stated that consumer confidence rose in October to its highest
level in more than four years with consumers being more upbeat about
improvements in the labor market. According to the Board, its index of consumer
attitudes came in at 72.2 from a downwardly revised 68.4 in September.
It was the highest level for that statistic since February 2008, though
it came in shy of the consensus estimate of 72.5. September was
originally reported as 70.3. The expectations index edged up to 82.9 from 81.5,
while the present situation index rose to 56.2 from 48.7. Consumers'
labor market assessment improved, with the "jobs hard to get" measure
slipping to 39.4 percent from 40.7 percent. The "jobs plentiful" gauge
gained to 10.3 percent from 8.1 percent. Consumers "appear to be in better spirits
approaching the holiday season," Lynn Franco, director of The Conference
Board Consumer Research Center, said in a statement. Consumer outlook on price increases was unchanged
from September with expectations for inflation in the coming 12 months
holding at 5.9 percent. The report had originally been scheduled to be
released on Oct 30, but was postponed due to the storm that hit the U.S.
northeast.
Gains in Manufacturing The Institute for Supply Management (ISM) reported
on Thursday that the rate of growth within the manufacturing sector
picked up modestly in October as new orders improved, though a measure
of employment slowed. According to the ISM, its index of national
factory activity rose to 51.7 from 51.5 in September, exceeding Street
expectations. A reading above 50 indicates expansion in the
manufacturing sector. It was the second month in a row the sector has
grown after contracting through the summer. After helping support the
U.S. economic recovery, the sector has faltered recently in the midst of
slower growth in China and uncertainty surrounding the euro zone debt
crisis. The forward-looking new orders measure gained to
54.2 from 52.3, but employment cooled to 52.1 from 54.7.
Productivity Rises The Labor Department announced on Thursday that
nonfarm productivity increased at a modest pace in the third quarter,
giving little sign that businesses are poised to ramp up hiring
significantly. Productivity, which measures hourly output per worker,
increased at a 1.9 percent annual rate. Many economists would read a drop in productivity as
a sign that companies are closer to maxing out production with existing
staff and would have to boost hiring. However, the third-quarter reading
matched the revised reading for the prior three-month period. Businesses emerged from the 2007-09 recession lean
and are showing little urgency to increase hiring, relying on their
existing workforce to meet production. Output increased at a 3.2 percent rate in the third
quarter. During the country's sharp economic downturn,
productivity grew rapidly as companies cut costs, particularly wage
bills. Productivity growth slowed sharply in 2011 and fell in the first
quarter of 2012, but has since snapped back to a 1.9 percent growth
rate. The report also indicated that unit labor costs fell
at a 0.1 percent rate in the third quarter, missing analysts'
expectations of a 1 percent increase.
Construction Spending Up Construction spending rose in September by the most
in three months, climbing 0.6 percent as
stronger spending on homes made up for drops in business and government
projects. to an annual rate of $851.6 billion, the Commerce
Department said on Thursday. That was in line with analysts' forecasts
in a Reuters poll. August's outlays were revised to a less sharp 0.1
percent drop. Home building is expected to add to economic growth
this year for the first time since 2005, although the housing sector
remains a shadow of what it was before a collapsed housing bubble helped
trigger the 2007-09 recession. Spending on private residential projects rose 2.8
percent, a reflection of this year's improving housing market. Muting the gain in overall construction, however,
private spending on nonresidential projects fell 0.1 percent. That could
be another sign that businesses have lost some confidence when it comes
to investing. Public sector construction spending fell 0.8
percent, declining for a third straight month. A 0.3 percent drop in
state and local spending fueled the overall decline, while outlays on
federal government projects slipped 6.2 percent.
Possible Layoffs Rise The number of planned layoffs by firms rose by 41.1
percent in October to the highest level in five months, although the
number includes more than 10,000 jobs in domestic auto plants in Europe,
a report said on Thursday. Employers announced 47,724 planned job cuts last
month, up from September's 33,816, according to the report from
consultants Challenger, Gray & Christmas. It was the highest level since
May. Domestic automotive companies said they will let go
of 11,615 workers, though that includes 10,900 Ford layoffs that will
affect workers in Belgium and the United Kingdom. The planned layoffs were modestly higher than the
42,759 announced in October last year. The total for the year so far
stands at 433,725, down from 521,823 for the same period in 2011. "While the Ford job cuts are not impacting American
workers, they indicate just how vulnerable companies in the U.S. are to
the situation in Europe", John Challenger, chief executive officer of
Challenger, Gray & Christmas, said in a statement. The last three months of the year tend to see
heavier lay-off activity and the weak third-quarter earnings season does
not bode well, Challenger said. The consumer products industry announced 5,250 cuts,
while electronics companies laid off 4,491 workers as the sectors were
hurt by a slowdown in consumer and business spending.
ADP Says Data Shows 158,000 Jobs Added in October Companies added 158,000 jobs in October, ADP said on
Thursday in a revamped report on the private sector labor market.
According to its National Employment Report, September's job gains were
revised upward to 114,000 after initially being revised to 88,200 as
part of ADP's new methodology. Under the old method, September's gain
was originally reported as 162,000. Economists often refer to the ADP report to
fine-tune their expectations for the nonfarm payrolls report due on
Friday, though it is not always accurate in predicting the outcome. The
overhaul is meant to bring ADP's numbers more in line with the
government's final revised jobs figures.
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MarketView for November 1
MarketView for Thursday, November 1